China's new quality productive forces, the latest catchphrase at this year's "two sessions," has been given high priority in modernizing its economy. In essence, it refers to advanced productivity that is freed from traditional economic growth modes and productivity development paths, featuring high-tech, high efficiency, and high quality.
What is the logic behind the path towards new quality productive forces? Given the current domestic and global circumstances, why is it so crucial for China at this particular time? In an exclusive interview with GDToday, Yilun Zhang, Research Associate & Manager, Trade 'n Technology Program at ICAS, shared his thoughts on decoding this buzzword.
According to Zhang, the new quality productive forces emphasize quality over quantity. "Traditionally, China's economic model has been export-driven, driven by cheap but scalable labor," Zhang concluded, "but now that has changed because China's demographics have changed and because of the economic transformation where it is moving up the value chain." That means China needs to move up and seek higher quality in economic growth.
The world misjudged China’s downward pressure
As the global economy is also at a transformative stage, many economies including China are facing downward pressure and trying to foster new economic drivers. With that being said, Zhang thinks it is only natural for China to seek high-quality development via "new quality productive forces."
However, many people in the world might have wrongly criticized its downward pressure. "Many said China's economy is in a relatively bad shape because consumers are not willing to spend enough." Zhang told GDToday, "In fact, the Chinese consumers have a higher demand, while the problem is that the supply side does not have a good enough product to satisfy consumers." Consequently, the downward pressure that China faces is primarily in the consumption sector. That explains why China needs to look at the demand side and reform its supply side.
Zhang also highlighted that China's drive towards its new quality productive forces should be put in a global context. Since China is moving up quickly on the global value chain, low-value added industries from China are being relocated to Southeast Asian countries, which are no longer China's competitors.
"Now China's primary competitor is the developed countries. They have high technology, and China is going to be one of them," he said, "China needs to generate more investment into this innovation to boost its production force."
EV industry heralds more new quality productive forces ahead
Most recently, auto giant Tesla's CEO Elon Musk struck a cooperation deal with China's search and mapping group Baidu during his visit to Beijing. That would pave the way for Tesla's semi-autonomous driving technology in China, and it will be a strong driver for quality productive forces, according to Zhang.
From his point of view, an EV is not only a cleaner version of transportation but also involves a new way of life. "Once automated driving becomes a reality, the time people use to commute or drive can be saved for other things, which frees up more potential for productivity." Other than that, by grasping the opportunity of the EV industry, China will also expect to have more sustained growth in upstream industries such as batteries and hydrogen energy.
Lessons China can learn from the US and Japan
As China marches towards newer and higher quality productive forces, it is important to clearly see the challenges facing China, Zhang pointed out. China should take note of the important lessons from the US and Japan.
Firstly, China should not neglect outdated and absolute industries during its economic transformation. Zhang gave the example of Detroit. "Look at what happened to Detroit. We should not abandon those workers. For China, an important balance should be maintained between these old-fashioned industries and new innovations," he concluded.
Secondly, China needs to liberalize its financial market to promote innovation and ensure that capital is channeled to the right sectors. Japan may have some lessons to learn from. "What we see in Japan right now is that the capital market is booming, but the problem is that the Japanese public hasn't really received any benefit from it," he explained, "Where does the money go? It only makes the rich even richer." This case reminds China of the need to coordinate with the financial market using the right policies.
Reporter | Jersey
Video | Wingheng
Editor | Steven, Will, James
